Inflation Hedge

Inflation Hedge

Investors often look to allocate capital to opportunities that keep pace with inflation, thereby effectively protecting them from the impacts of inflation i.e. that provide an inflation hedge. Gold is seen as the classic inflation hedge but in effect its correlation with inflation is far from positive and gold has delivered negative returns during periods of inflation. Index-linked bonds (cf.) by definition provide a perfect inflation hedge as cash flows are indexed to inflation.

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